Ally CDs offer high APYs and low early withdrawal penalties with no opening deposit

Ally is an online-only bank. Alyssa Powell/Business Insider

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Ally Financial is a bank known for operating entirely online and for its high-yield savings account. The bank offers a wide range of CD types, and it's praised for paying competitive rates and providing customers with an easy-to-use online interface.

A certificate of deposit, or CD, is a type of savings account that holds your money for a set amount of time, and the bank pays you a fixed interest rate on your savings. If you withdraw your money early, you typically forfeit some or all of the interest you've earned. With Ally, you can choose from three types of CDs: High Yield CDs, Raise Your Rate CDs, and No Penalty CDs. Each type offers competitive rates, and the one you choose will likely depend on your banking needs.

Ally is offering a 13-month CD and 20-month for a limited time. If you open a 13-month CD by October 10, 2022, you'll earn 2.75% APY, and it will automatically renew as a 1-year CD at the end of the term. If you open a 20-month CD by September 14, 2022, you'll earn 2.85% APY and it will automatically renew as an 18-month CD.

Ally currently ranks as our top pick for the best bank overall for opening a CD, but we know "best" can be different for different people. Read on to find out whether an Ally CD is the best match for you.

Should you open an Ally CD?

If you're searching for a CD with a competitive APY, Ally is a good option. Its rates are relatively high, and if you choose a Raise Your Rate CD, you may be able to increase the APY during its term.

Ally is also a solid choice if you want the option to withdraw money from your CD before it reaches maturity. Ideally, you would leave the money in your CD until the end of the term, but it can be nice to know you have the option to withdraw your funds early without paying too much in fees.

The bank also offers a No Penalty CD, which doesn't charge any fees if you withdraw your money early. Not all banks offer no-penalty CDs, so if this type of account appeals to you, Ally could be a good fit. No Penalty CDs still offer competitive rates, but in exchange for flexibility, you'll receive a slightly lower rate than if you chose a different type.

Even if you choose a High Yield or Raise Your Rate CD rather than a No Penalty CD, withdrawing early will come at a lower cost than it does with many competitors.

Ally may appeal to people who can't deposit much money right off the bat. Many institutions require you to put down an opening deposit of at least $500 to open a CD, but Ally lets you open an account with no money upfront. This makes a CD accessible for people who don't have hundreds of dollars from the get-go. 

Ally could be a good fit if you don't mind banking digitally. There are no physical branch locations, so you'll do all your banking online, through the app, or over the phone.

Finally, you might like Ally if you want to do all your banking with one institution. You can also open a high-yield savings account, checking account, and money market account with Ally.

An Ally CD may be the best fit for you — but if your main priorities are flexibility and no minimum deposit, you might prefer to save your money in a high-yield savings account instead. Interest rates may not be as high, but the difference should be minimal. Ally high-yield savings account rates are comparable to its CD rates, and the difference between an Ally CD and other top banks' high-yield savings accounts should be minimal.

Pros of opening a CD with Ally

You can choose from 3 types of CDs, or 11 CDs total

Ally offers three types of CDs: High Yield CDs, Raise Your Rate CDs, and No Penalty CDs (more on their specific features below). This makes it easy to find a CD that satisfies your preferences.

• You can open a High Yield CD (Member FDIC) for 3 months, 6 months, 9 months, 1 year, 15 months, 18 months, 3 years, or 5 years. High Yield CDs have fixed interest rates, so your APY won't increase or decrease throughout the term. If you withdraw from the CD before the term ends, you'll pay a penalty.
• Raise Your Rate CDs (Member FDIC) come with 2-year or 4-year terms. If Ally's rates go up before your CD term ends, you can request to increase your rate once with a 2-year term or twice with a 4-year term. Like High Yield CDs, Raise Your Rate CDs require you to pay a penalty if you withdraw funds before the term ends.
• All No Penalty CDs (Member FDIC) come with 11-month terms. No Penalty CDs lock in your rate, just like High Yield CDs. However, you won't pay a penalty if you withdraw early.

Ally offers competitive CD interest rates

Ally CD rates are higher than many competing banks' rates. High Yield CD rates range from 0.75% to 3%, depending on the length of your term.

Both 2-year and 4-year Raise Your Rate CDs pay 2.35% APY. You may increase your rate once during the 2-year period or twice during the 4-year period.

No Penalty CDs pay 2% APY.

CD rates often fluctuate along with the federal funds rate, so we will keep updating Ally rates as necessary.

You'll pay less to withdraw funds early than you would with many banks

Unless you have a no-penalty CD with an institution, you'll be charged a fee if you withdraw from a CD before the term is over. Some banks charge the same amount no matter how long the term of your CD may be, while others (like Ally) charge more or less depending on the length of your term. 

Ally's penalties for early withdrawals are as follows:

• 60 days interest penalty for a CD term of 24 months or less
• 90 days interest penalty for a CD term of 25 months to 36 months
• 120 days interest penalty for a CD term of 37 months to 48 months
• 150 days interest penalty for a CD term of 49 months or more

Ally's fees for early withdrawals are lower than many competing banks' early withdrawal penalties. Ally's 150-day interest fee is less than some banks' penalties for all early withdrawals.

You don't need any money to get started

There's no required opening deposit for any Ally CDs, but you won't earn interest until you put some money into the account. You also don't have to maintain a minimum balance to avoid fees or to earn interest. Many banks require opening deposits of at least $500 to open a CD, but Ally makes it easy for people with less money to start saving.

However, if you open a No Penalty CD with Ally, you'll earn more interest if you put down an initial deposit of at least $5,000, and even more if you put down $25,000.

You have access to 24/7 customer service

Ally customer support is available at all times. You can call a representative or chat with a real person online or through your app.

You can set up other banking accounts with Ally

Ally also provides checking, high-yield savings, and money market accounts. This bank is convenient for people who want to do all their banking with one institution.

Its mobile app is easy to use

Ally's app has received positive reviews for being useful and simple to navigate, and it has features many other banking apps lack. You can use your app to do everything from deposit a check to locate the closest in-network ATM.

Cons of opening a CD with Ally

There are no physical locations

If being able to walk into your bank and speak with an employee is an important part of the banking experience for you, then Ally may not be the best fit. There are no physical locations, so you'll have to do all your banking online, through the app, or over the phone.

You may find a higher APY elsewhere 

Ally CDs come with competitive interest rates, but depending on which CD you want, you may be able to find banks that offer slightly higher rates. 

Ally CD features

Ally offers three types of CDs: High Yield CDs, Raise Your Rate CDs, and No Penalty CDs. You won't pay a monthly service fee for any of these CDs, and you don't need a minimum opening deposit or minimum account balance to maintain your account.

High Yield CDs

When you open a High Yield CD, the rate you receive upon opening is fixed. If you withdraw from the CD before the term is up, you'll pay a penalty. The amount you pay depends on how long you've had the account.

The High Yield CD term lengths and rates are as follows:

• 3 months: 0.75% APY
• 6 months: 1.65% APY
• 9 months: 1.70% APY
• 1 year: 2.70% APY
• 18 months: 2.80% APY
• 3 years: 3% APY
• 5 years: 3% APY

If you choose a High Yield CD and withdraw from the account before your term ends, you'll face the following penalties:

• 60 days interest penalty for a CD term of 24 months or less
• 90 days interest penalty for a CD term of 25 months to 36 months
• 120 days interest penalty for a CD term of 37 months to 48 months
• 150 days interest penalty for a CD term of 49 months or more

Raise Your Rate CDs

When you open a Raise Your Rate CD, you have the option to increase your rate during the term if Ally's rates go up. As with High Yield CDs, you'll pay a fee if you withdraw funds early. Here are the Raise Your Rate terms and current rates:

• 2 years: 2.35% APY. You may increase your rate once during the two-year period.
• 4 years: 2.35% APY. You may increase your rate twice during the four-year period.

If you choose a Raise Your Rate CD and withdraw from the account before your term ends, you'll face the following penalties:

• 60 days interest penalty for a CD term of 24 months or less
• 90 days interest penalty for a CD term of 25 months to 36 months
• 120 days interest penalty for a CD term of 37 months to 48 months
• 150 days interest penalty for a CD term of 49 months or more

No Penalty CDs

If you open a No Penalty CD and withdraw from the account before the term ends, you won't have to pay an early withdrawal fee. Ally No Penalty CDs come with an 11-month term and pay 1.40% APY.

How do Ally CDs compare to similar CDs?

Ally vs. CIT Bank

Ally doesn't require an opening deposit, but CIT calls for a minimum initial deposit of $1,000. CIT also charges higher penalties if you withdraw from your account before it matures. 

Ally and CIT Bank both offer a wide range of CD types. However, Ally currently pays a higher interest rate on most regular CDs.

Ally vs. Discover

While Ally is ideal for savers who don't have much money upfront, Discover requires an opening deposit of $2,500.

If  you can swing the $2,500 deposit, your choice will likely come down to what you want out of a CD.

Discover offers high-yield CDs with longer terms than Ally does, all the way up to 10 years. However, it doesn't have CDs that allow you to raise your rate, and there aren't any no-penalty CDs. 

Ally vs. Marcus by Goldman Sachs

Ally doesn't require an opening deposit or a minimum account balance. If you open a CD with Marcus by Goldman Sachs, you must make an initial deposit of at least $500.

Ally and Marcus by Goldman Sachs both offer competitive interest rates on their CDs, so your choice may come down to which specific CD you want to open.

Ally's early withdrawal penalties are more affordable than Marcus' penalties. However, both offer no-penalty CDs. Ally only has 11-month No Penalty CDs, and your rate is determined by how your balance. Marcus gives you the option to open a 7-month, 11-month, or 13-month no-penalty CD, and each comes with a different rate.